For five years from April, fee rises at Heathrow will be
capped at 1.5 percent below U.K. inflation as determined by the
retail price index, the Civil Aviation Authority said. It cited
stronger traffic forecasts for dropping recent moves for fees to
track RPI, which had overturned plans for a -1.3 percent cap.

“In October the CAA accepted the need for changes to their
April proposals, but has now reverted to a draconian position,”
Heathrow Ltd. Chief Executive Officer Colin Matthews said in an
e-mailed statement. “We will review our investment plan to see
whether it is still financeable.”

The CAA had been reviewing the maximum fees that London’s
top airports -- Heathrow, Gatwick and Stansted -- can charge
airlines to use their facilities. While the levies drive up air
fares, they underpin investment such as a 3 billion-pound ($4.9
billion) spending plan intended to allow Heathrow to keep pace
with rival hubs Paris Charles de Gaulle and Frankfurt.

‘Efficiencies’

The regulator took “a step in the right direction to
address the excessive charges levied by Heathrow,” British
Airways, the airport’s biggest user, said by e-mail, adding that
“there is plenty of scope for further efficiencies.”

Heathrow prices are still triple the level of a decade ago
according to Virgin Atlantic Airways Ltd. “Today’s decision is
a far cry from the reduction needed to mitigate the incredibly
steep price rises,” CEO Craig Kreeger said in a statement.

Airlines had sought a cap of 9.8 percent below inflation,
likely to result in significant fee cuts. Inflation was running
at 2.6 percent in November, based on the latest RPI numbers.

The decision to deregulate Stansted, Ryanair’s biggest
base, will “harm consumers,” the region’s largest discount
carrier said in a statement today.

‘Regulatory Failure’

Ryanair, which carried 81.4 million passengers last year,
is counting on the airport north of London for 25 percent of
expansion by 2019, CEO Michael O’Leary said in September. The
airline committed to boosting passenger numbers there by 50
percent to more than 20 million over 10 years after agreeing on
terms for growth with new owner Manchester Airports Group.

“Stansted will be able to further increase airport charges
whenever it wishes, without any reference to competitive price
levels,” Juliusz Komorek, Ryanair’s legal and regulatory
affairs director, said in a statement. “Today’s decision is an
example of the CAA’s regulatory failure.”

Stansted is being deregulated from April because it lacks
“substantial market power,” the CAA said, “taking into
account the long-term contracts the airport now has in place
with its main airline customers.”

MAG welcomed the decision as “a positive recognition by
the CAA that in Stansted’s case competition rather than
regulation will deliver the best outcomes.”

Gatwick, Europe’s busiest single-runway airport, is being
given more freedom in setting charges while the CAA retains the
power to intervene. Prices could rise 0.5 percent more than RPI
on average for a seven-year period under a plan first presented
by U.S.-based Global Infrastructure Partners, the hub’s owner.

CEO Stewart Wingate said he was “disappointed” the CAA
still requires Gatwick to operate under an economic license and
expressed concern over the “intrusive nature” of monitoring.